About the only thing he got wrong was his prediction that the financial collapse would be inflationary, but of course he called gold correctly (it was about $300 at the time).
From his Texas Straight Talk column on his Congressional site:
This week marks the deadline for the so-called congressional Super Committee to meet its goal of cutting a laughably small amount of federal spending over the next decade. In fact the Committee merely needs to cut about $120 billion annually from the federal budget over the next 10 years to meet its modest goals, but even this paltry amount has produced hand-wringing and hysteria on Capitol Hill. This is only cutting proposed increases. It has nothing to do with actually cutting anything. This shows how unserious politicians are about our very serious debt problems.
To be fair, however, in one sense members of the Super Committee face an impossible task. They must, in effect, cut government spending without first addressing the role of government in our society. They must continue to insist the federal government can provide Social Security, Medicare, and Medicaid benefits in the future as promised, while maintaining our wildly interventionist foreign policy. Yet everyone knows this is a lie.
Keep in mind that the 2011 federal deficit alone was about $1.3 trillion, which means the Super Committee needs to cut that much PER YEAR rather than over a 10 year period. If Congress ever hopes to address its debt problem, it must first stop accumulating any new debt immediately, in 2012.
Federal revenue likely will be about $2.3 trillion in fiscal 2012. The 2004 federal budget was about $2.3 trillion. So Congress simply needs to adopt the 2004 budget next year and the federal government will balance outlays and revenue. That’s all it would take to produce a balanced budget right now. Was the federal government really too small just 7 years ago, in 2004? Of course not. Only Washington hysteria would have us believe otherwise.
Read the whole thing here:
The first Republican debate of the 2012 US presidential election was held last night in South Carolina. I found this video of Ron Paul’s responses. Looks like he got a lot of time, unlike in the 2008 debates:
He also raised a million dollars online yesterday in the first of probably many moneybombs. He has never expected to win, but runs because the election is the best way to spread his message. The appearance of fellow libertarian Republican Gary Johnson this year is probably a direct result of Paul’s trailblazing.
BTW, I post a lot on twitter under this account – some on the resources sector, some on the markets in general and whatever else I feel like: http://twitter.com/miningalmanac
Arlan Specter, a creature of the Senate for three decades, has lost his bid for Democratic nomination. It is exceedingly rare for a sitting congressman or senator to not even be nominated by his own party, but such is the anger towards incumbants. I’m glad to see this guy go, since he is a politician of the worst type, most remembered for leading the coverup of the John Kennedy murder and pushing the preposterous single bullet theory (wikipedia):
According to the single-bullet theory, a three-centimeter-long copper-jacketed lead-core 6.5-millimeter rifle bullet fired from the sixth floor of the Texas School Book Depository passed through President Kennedy’s neck and Governor Connally’s chest and wrist and embedded itself in the Governor’s thigh. If so, this bullet traversed 15 layers of clothing, 7 layers of skin, and approximately 15 inches of tissue, struck a necktie knot, removed 4 inches of rib, and shattered a radius bone. The bullet was found on a gurney in the corridor at the Parkland Memorial Hospital, inDallas, after the assassination. The Warren Commission found that this gurney was the one that had borne Governor Connally. This bullet became a key Commission exhibit, identified as CE 399. Its copper jacket was completely intact. While the bullet’s nose appeared normal, the tail was compressed laterally on one side.
In its conclusion, the Warren Commission found “persuasive evidence from the experts” that a single bullet caused the President’s neck wound and all the wounds in Governor Connally.
Rand Paul, Ron Paul’s son, has won the Republican nomination for Jim Bunning’s Senate seat in Kentucky, defeating his cookie-cutter opponent in a landslide. Rand’s positions are mostly libertarian like his father’s, especially on regulation, taxation, banking and other domestic issues, but he has made some disconcertingly hawkish noises when it comes to foreign policy.
This could be an interesting election year. It would be great to see a lot more bums tossed out — not that it should make any significant difference to policy, since there are only a handful of people running for national office who would consistently take anti-state positions, but it’s just nice to see karma at work.
Thomas Woods, Jr., PhD, Prepared Testimony in Support of HR 1207, The Federal Reserve Transparency Act of 2009, House Financial Services Committee, September 25, 2009:
There is no good reason for Americans not to know the recipients of the Fed’s emergency lending facilities. There is no good reason for them to be kept in the dark about the Fed’s arrangements with foreign central banks. These things affect the quality of the money that our system obliges the American public to accept.
The Fed’s arguments against the bill are unlikely to persuade, and will undoubtedly strike the average American as little more than special pleading. Perhaps the most frequent of the claims is that a genuine audit would jeopardize the alleged independence of the Fed. Congress could come to influence or even dictate monetary policy.
This is a red herring. The bill is not designed to empower politicians to increase the money supply, choose interest-rate targets, or adopt any of the rest of the Fed’s central planning apparatus, all of which is better left to the free market than to the Fed or Congress. It seeks nothing more than to open the Fed’s books to public scrutiny. Congress has a moral and legal obligation to oversee institutions it brings into existence. The convoluted scenarios by which merely opening the books will lead to an inflationary catastrophe at the hands of Congress are difficult to take seriously.
At the same time, as we hear this objection repeated time and again, we might wonder just how independent the Fed really is, what with its chairman up for reappointment by the president every four years. Have these critics never heard of the political business cycle? Fed chairmen have been known to ingratiate themselves into the president’s favor close to election time by means of loose monetary policy and the false (and temporary) prosperity it brings about. Let us not insult Americans’ intelligence by pretending this phenomenon does not exist…
If there is any truth to the idea of Fed independence, it lay in precisely this: the Fed may reward favored friends and constituencies with trillions of dollars in various kinds of assistance, while keeping the public completely in the dark. If that is the independence we’re talking about, no self-respecting American would hesitate for a moment to challenge it.
A related argument warns that the legislation threatens to politicize lender-of-last-resort decisions. Again, this is untrue. But even if it were true, how would that represent a departure from current practice? I hope we are not asking Americans to believe that the decisions to bail out various financial institutions over the past two years, and in particular to allow them to become depository institutions overnight that they might qualify for assistance, were made on the basis of a pure devotion to the common good and were not political at all. Most Americans, not unreasonably, seem convinced of another thesis: that Goldman Sachs, for instance, might be just a little bit more politically well connected than the rest of us…
If our monetary system were really as strong, robust, and beyond criticism as its cheerleaders claim, why does it need to rely so heavily on public ignorance? How can it be a sound banking system that depends on keeping the public in the dark about the condition of its financial institutions?
Let me also make clear that supporters of this legislation are strongly opposed to a watered-down version of the bill – which, incidentally, would only increase public suspicion that someone is hiding something.
If the Federal Reserve Transparency Act passes and the audit takes place, the American people will have achieved a great victory. If the legislation fails, more and more Americans will begin to wonder what the Fed could be so anxious to keep hidden, and the pressure for transparency will simply intensify. A recent poll finds 75 percent of Americans already in favor of auditing the Fed. The writing is on the wall.
The Federal Reserve may as well get used to the idea that the audit is coming. That would be a far more sensible approach than the counterproductive and condescending one it has adopted thus far, in which the peons who populate the country are urged to quit pestering their betters with all these impertinent questions. The Fed should take to heart the words of consolation the American people are given whenever a new government surveillance program is uncovered: if you’re not doing anything wrong, you have nothing to worry about.
The superstitious reverence that Americans have been taught to have for the Federal Reserve is unworthy of the dignity of a free people. The Fed enjoys a government-granted monopoly on the creation of legal-tender money. It is not an unreasonable imposition for Americans to demand to know about the activities of such an institution. It is common sense.
(thanks again to zerohedge for finding this video)
I remember when I first discovered a speech by Ron Paul back in boom-time 2005, and was shocked that a Congressman was so eloquently warning of the dangers of fractional reserve lending, the Federal Reserve system, and welfare/warfare deficit spending. It was the first time that I could fully respect a standing politician.
Dr. Paul is still the nation’s strongest voice for an honest monetary and banking system, and he delivered a zinger in front of Bernanke and Frank yesterday. If, like me, you haven’t heard him speak in a while, have a listen and you’ll remember why his campaign was so exciting for so many of us.
Money quote: “I would suggest that the problems we have faced so far are nothing compared to what it will be like when the world not only rejects our debt, but our dollar as well. That’s when we’ll witness political turmoil that will be to no one’s benefit.”
Now wouldn’t it be great to have Peter Schiff to cause the same trouble in the Senate?
Here is a list of popular personages who predicted this credit implosion and depression while the bubble was still being blown:
- Robert Prechter. In 2002, he published Conquer the Crash, How to survive and prosper in a deflationary depression. So far right on the money except gold hasn’t fallen hard (yet).
- Jim Grant. Erudite writer of Grant’s Interest Rate Observer, he was never in the super-bear category, but he saw the writing on the wall.
- Jim Rogers. The man has good timing when it counts. He bought a NYC townhouse for 107k in 1977 and sold it for 16 million last year and got the heck out of Dodge. He moved his family, business and money to Singapore and shorted the US market. Missed the turn in commodities, though, and refused to sell China out of some kind of principle.
- Peter Schiff. Published Crash Proof in 2006, which has been pretty accurate other than Schiff’s missing the deflation stage and holding commodities and foreign stocks too long. The results of the New Deal and bailouts are likely end with the currency failure he predicts.
- Mish Shedlock. Publisher of a popular blog, Mish has been warning of a deflationary depression since 2005 or 2006, and now has the best record of predicting its course (deflation, bailouts, gold and the dollar doing well).
- David Tice. Manager of the Prudent Bear Fund, BEARX, which is performing spectacularly.
- Marc Faber, writer of the Gloom, Boom, Doom Report. Nailed it, along with the turn in commodities.
- Doug Casey, the original international speculator, and publisher of the Casey Research newsletters. Missed the deflation part, also burned by commodities, but spot on about fascism.
There are countless others who saw this coming, including Congressman Ron Paul, who’s own studies of monetary policy inspired him to first run for office.
What do all of these men have in common that allowed them to see around the corner? They understand money and the credit cycle. How did they learn it? Not in college, that’s for sure, because colleges teach perverse Keynesian claptrap. They have all read the Austrian economists, in particular Ludwig von Mises and his American pupil Murray Rothbard. Their explanation of the business cycle as the credit cycle is both elegant and extremely powerful.
And what do all of these followers of the Austrian School think we (meaning our governments) should do, now that their worst fears are coming true? In a word, to a man, nothing.
Don’t fear the crash. Fear fascism.
You see, the very worst fear of Austrians is not a crash or a depression, which is actually the healthy restoration of sanity after a credit-fueled mania, but the expansion of government that seems to follow these events like day follows night. Frederic Hayek laid out these fears in The Road to Serfdom, and that is exactly where we are going: utter economic collapse. The government is going to hamstring the markets and drain our resources for its pet projects and wars, all for our own good. Their aim is to stave off a proper accounting of the losses that have already taken place, and to preserve the power of those who inflated our way into this mess.
The damage from the bubble is already done. Government adds new damage.
What not one person in 10,000 understands is that the losses have already taken place. The losses were the waste of resources and labor for doomed endeavors that never made sense: think McMansions in the desert, and the roads, power plants and strip malls that served them. The price declines that we are now experiencing are necessary to restore valuations that reflect true values, because proper pricing clears markets — it allows people to accurately assess the worth of certain items against that of others.
A 5000 sqaure foot house on a dry hillside 20 miles outside of Phoenix is a money pit, not a million dollars. It was never properly valued in terms of the labor and raw materials that went into it. But because bankers, backed up by the Fed and various government programs and guarantees, would lend $1 million to buy it, those resources were drawn out into the desert instead of to sustainable productive uses.
An honest, gold-backed monetary system and a free-market banking system with no government support would never have allowed bankers to misprice assets so greatly. Any that did would face severe difficulties inducing the public to trust them with deposits. But with FDIC, who cares what your bank does with your money? And bankers say, “with the Fed to bail me out, who cares if all my loans blow up?”
What will happen if government doesn’t lift a finger?
The owners of McMansions will lose them to the banks or other mortgage holders, and those mortgage holders, if they bought the paper with loans of their own, will lose them to others, and so on. Almost every bank in the world will fail. They have all come to depend on deposit insurance and central banks to cover for the fact that they have been reckless and insolvent from nearly day one. There will be no bank lending at all.
What will happen to the depositors? Well, almost all of their money will be lost.
So, that is what we are looking at: every bank failing, zero bank lending, almost all the money in the world going to heaven. How is that not the end of the world? Simple: It is a reverse split. In 2006, let’s say, there was a million dollars in total bank deposits. Then in 2008 all the banks go under. All that is left is the cold cash in people’s pockets, let’s say $100,000 in all.
That remaining cash becomes extremely valuable. It has to work where one million did before. If you had $10 in your pocket and $90 in the bank, you now treat each dollar as if it were ten. The key is that so does everyone else. The world still has its unit of account and medium of exchange, we have just moved the decimal point over on all prices. (Note: gold and silver would rapidly re-enter circulation and quickly become the preferred money, as they always do until government outlaws them).
Of course, deflation on this scale makes debts unpayable, so essentially all debt is defaulted upon, but of course most creditors are bankrupt too. Contracts have to be renegotiated or annulled. No big deal, really. The assets are all still there, just the same as before. Nothing has burned down. A car bought on credit still gets the same mileage as before its loan went bad, a house keeps you just as dry.
Trust the prudent and smart, not bankers and politicians.
Such an event brings about a massive transfer of wealth from the reckless to the prudent and farsighted, who are exactly the people you want making the decisions about what to do with money and assets after the crash. They are statistically and philosophically the best equipped to decide what will generate the highest returns with the lowest risk. Life goes on. There is nothing to rebuild because nothing was destroyed. It is all just reordered in a more sensible fashion. The house in the desert is scrapped for materials. The Lehman mortgage traders find something productive to do, like drive cabs.
But that outcome is so quaint, so 1800s, so gold standard. We’re more scientific today. Bernanke is a wise economist. Congress is benevolent. War is peace, and lies are truth.
Jim Bunning, a Repuplican from Kentucky on the banking committee, has been sounding like Ron Paul lately. Bloomberg has the interview:
“I sincerely believe that Henry Paulson and Ben Bernanke should resign,” said Bunning, a Republican from Kentucky on the Senate Banking Committee. “They have taken the free market out of the free market.”
“We no longer have a free market in the United States, we have a government controlled free market,” Bunning said in an interview. Paulson, a former chief executive officer of Goldman Sachs Group Inc., “is acting like the minister of finance in China.”
“When I picked up my newspaper yesterday, I thought I woke up in France. But no, it turned out it was socialism here in the United States,” he told Paulson at a July 15 Senate Banking Committee hearing.
Following Paulson’s Sept. 7 announcement of the takeover of Fannie and Freddie, Bunning said he now feels like a citizen of China.
Former Phillies Pitcher
“No company fails in communist China, because they’re all partly owned by the government,” said the former pitcher for the Philadelphia Phillies.
Bunning accused Paulson of deception when he told Congress in July that the Treasury’s plan would instill such confidence among investors that it would never have to be used.
Paulson “saw and knew what was happening, and didn’t tell the truth to the banking committee,” Bunning said yesterday.
Mr. Bunning hits the nail on the head, but the brand of socialism ascendant in the US should more properly be called fascism, as it heavily favors an oligarchy and is served with equal helpings of nationalism, militarism and surveillance.